One June 28, 2012, the United States Supreme Court issued its decision on the constitutionality of the Patient Protection and Affordable Care Act (the “ACA”) in NFIB v. Kathleen Sibelius, Secretary of Health and Human Services. The Court found that the “individual mandate” and all of the employer provisions of the ACA were constitutional. While the regulatory requirements of the ACA are numerous, and apply to many types of businesses, healthcare providers, insurers, investors and government, this article will focus on the requirements for employers, and the time line for when those requirements become effective. The relevant employer compliance provisions are as follows:
• Medical Loss Ratio Rebates. This year, employers have received or will be receiving Medical Loss Ratio Rebates from their group health insurance plan carriers. Employers are required to determine, based on the language of their insurance plans, whether all or part of the rebate can be refunded to the employees, or whether the refund must be used for the employees’ benefit.
• Summary of Benefits and Coverage. For the open enrollment period beginning in 2013, employers must provide to their employees a Summary of Benefits and Coverage, providing a highly detailed list of the terms of the various health plan(s) available to employees. The Summary is designed to facilitate employee comparison of different plan offerings by the employer.
• Reporting of Coverage on W-2’s. The 2012 W-2 forms distributed by employers in early 2013, and all W-2’s issued thereafter, will require that employers report the total cost of any group health plan provided to the employee. While the amount spent on the employee’s coverage is not a taxable item (to the employee), the amount is required for reporting purposes on the employee’s Income Tax Return.
• Medical Flexible Spending Accounts. Beginning in 2013, employee contributions to their flexible spending accounts will be limited to $2,500.
• Employer Mandate. Beginning in 2014, large employers (those with or anticipating 50 or more full-time equivalent employees) are required to provide group health coverage with certain “minimum essential requirements.” Regulations detailing the requirements and any exceptions have yet to be promulgated, but this is already being referred to as the “pay or play” mandate. In certain cases, the employer can exclude seasonal employees if it exceeded 50 full time equivalent employees on 120 or fewer in the calendar year. At the present time, if an employer falling under this mandate fails to provide the “minimum essential coverage,” the employer will be subject to a penalty of about $2,000 per full time equivalent employee per year. “Minimum essential coverage” is eligible employer-sponsored plan coverage (excluding certain excepted benefits, such as stand-alone dental or vision plans) that is “affordable” and provides “minimum value.” While there is still some uncertainty on how determination of “minimum value” will be made, it is generally believed to mean that at least 60% of the costs of the average plan’s coverage is borne by the employer (i.e., the employee’s share of coverage is less than 40%).
• Nondiscrimination. Beginning in 2014, the ACA prohibits group health plans from providing more favorable benefits to highly paid employees. Failure to abide by this policy also bears financial repercussions. As such, if employers offer tiered benefits (one to rank and file and another, more comprehensive plan to executives), this provision will impact that employer. Regulations are currently being reviewed with respect to implementing this nondiscrimination requirement.
• Automatic Enrollment. Beginning after 2014, employers with more than 200 employees will be required to automatically enroll new hires in group health plans – in essence creating an “opt-out” rather than an “opt in”.
Because many of the provisions of the ACA came into effect this year or will become effective over the next year, the time is now for employers of every size to ensure that their programs are in compliance. Given the complexities of many insurance plans, and the lead time that may be required to ensure compliance with information reporting and new cafeteria plan limitations, as well as modeling the fiscal impact of the ACA overall, it is recommended that employers consult with counsel, accounting and payroll professionals to ensure that they are well informed, and are in full compliance as more regulations are finalized.
** For questions about how implementation of the ACA will impact your business, please feel free to contact Vish Petigara at Antheil Maslow & MacMinn, LLP at (215) 230-7500 or vpetigara@ammlaw.com **